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IACCM - International Association for Contract & Commercial Management Contracting Excellence Magazine
 

Contracting Excellence Magazine - Feb 2009

 
 

in this Leadership & Strategy issue

 

 



 

 

 


 

In turbulent times, survival is not enough

 
This edition of Contracting Excellence tackles questions that are important for those with responsibility for contracting and trading relationships: Tim Cummins, CEO, IACCM
 
 

by Tim Cummins, CEO, IACCM 

In times of such uncertainty, qualities of leadership and strategy take on added importance.
 
This edition of Contracting Excellence tackles questions that are important for those with responsibility for contracting and trading relationships:
 
      In the context of the contract management, legal and procurement communities, what importance do leadership and strategy have?
       What do “good” leadership and strategy look like, and what forms do they take?
       What is the state of leadership and strategy in these communities?
      What can individuals do to safeguard their position in these uncertain times?
 
IACCM talent surveys have consistently shown that many professionals and managers consider “lack of leadership” by their functional heads to be a significant problem. In many cases, they appear to associate weaknesses in leadership with an overall absence of strategy. However, those same functional heads frequently highlight a shortage of leadership skills among their staff.
 
What exactly do people mean and expect when they think about leadership and strategy? We asked three groups to give us their opinions for this issue devoted to leadership and strategy.
 
• Senior practitioners offer their perspectives on the importance and nature of leadership and strategy, examples of good practice.
• Academics comment on the way needs are changing and how they are responding to those changes.
• Providers (consultants and software companies) who regularly interface with our community provide their observations on the quality of leadership and strategy today.
 
Overall, the picture that emerges is far more encouraging than the survey results would imply. Yet there is clearly room for improvement.
 
       Many contracts, legal and procurement groups remain highly tactical in their approach to business needs. They are driven by a transactional workload that leaves them vulnerable to changes in demand and priorities.
   The current leaders have been slow to understand the power of information. They are not exploring the extent to which new data sources or new metrics could transform their ability to influence strategic debate at a corporate level.
     General concerns about a “talent gap” have not translated into orchestrated or specific actions. There is little evidence that current leaders have moved beyond generalities, to agree precisely what “talents” are missing, nor how the perceived gap might be filled.
 
At times of major change, especially unwanted change such as this economic crisis, it is easy to lose confidence in the future. Yet better times will of course emerge. And those who have exhibited leadership and developed strategies — both personal and organizational — will emerge faster and stronger.
 
Tim Cummins, CEO, IACCM.

 

 

 
 

 


 

 

How secure is your job? The role of personal leadership in uncertain times

 
It is inevitable at a time of such economic turmoil that we wonder about our own job security. So how threatened are those in the contract management, legal and procurement community? And are there steps we can take to bolster our position, or aspects about our organization that will improve our chances of survival?   Tim Cummins, CEO, IACCM
 
 
by Tim Cummins, CEO, IACCM

Of course, it has now become the flavor of the day to issue lists of “The Top 10 Secure Jobs”. There is surprisingly little overlap in the views of the “expert” commentators on what these 10 jobs are. And I am quite sure we could find counter-positions for many of them.
 
But there are some trends and some opportunities. For example, it is generally true that public sector jobs — at least short-term — may be more secure than private sector. But for how long? And to what extent will shifts in public policy result in new opportunities for some, but work elimination for others?
 
Another key area relates to the management of trading relationships, at both an individual and portfolio level. Company survival depends on the ability to oversee effective supply and customer relationships. This means not only superior selection of the right partners, but also continued oversight of performance. As one expert puts it, “With the widespread awareness that excessive risk-taking got banks — and so the wider economy — into their current difficulties, companies are stepping up their efforts to monitor potentially disastrous transactions and to comply with the tighter regulations that the financial crisis is bringing.”
 
This expert, who comes from the recruitment industry, calls such professionals “compliance/risk officers” — and indeed that is one possible title. But interestingly, this is an area of development that has not proven especially successful. In the view of many observers, most risk specialists seem to be focused in rather narrow areas of financial risk and are somehow blind to wider commercial risks and policies. They are frequently either detached from the broader aspects of the business, or isolated within specific business units.
 
Compliance is similarly an area that has failed to deliver the expected benefits. Once again, the role has tended to attract quasi-auditors who police the wrong-doing of others, rather than seeking out the reasons for delinquent behavior and then driving innovation and change to address its root causes. As a result, compliance specialists tend to be viewed by many in the business as a source of risk (and to be avoided), rather than as managers of risk (and to be welcomed and included). After all, how many people welcome visits from the auditors? And what executive really equates audit with long-term business growth and profitability?
 
Characteristics for success
 
Business success in these tough conditions will depend on people who have the characteristics needed to make balanced and objective decisions. In the area of trading relationships, there are several criteria for success:
 
        Breadth of view. Creating the right commercial offerings and deals requires people with a cross-functional perspective and an innate understanding of the sources of risk and complexity. They must have a strong appreciation of business capabilities and potential - in other words, does this commitment make sense?
 
       Communication skills. These are roles that demand the ability to both listen and speak. They require clarity of expression and a talent at making complex situations easy to understand. This means building rapport with key stakeholders and speaking in terms they understand. It means being assertive, not confrontational; encouraging openness, not secrecy or blame.
 
        Objectivity. Much of the need for compliance is driven by the skewed behaviors driven by corporate management and measurement systems (including bonuses, incentives etc.). Therefore it is critical that those who are required to make these “balanced business decisions” are not part of this bonus and incentive structure.
 
In such uncertain times, many groups vie for positions of increased power and influence. It is human nature to do so. But having the loudest voice or historic influence does not mean that they are equipped for this dramatically different world that we now face. Indeed, they were frequently part of the problem, so may be singularly ill-equipped to be today’s solution. So, in addition to thinking about your personal skills, it is important to look at the realities of your organizational positioning. Individual success is enabled by the courage and vision of functional leadership. IACCM research and benchmarks (for example, our capability assessments) show that consolidation of skills within “centers of excellence” and shared services models is the way to build overall security through enhanced – and measurable – performance.
 
Safeguarding your position
 
There is little doubt that some within the commercial, contracts, legal and procurement community have the personal skills and knowledge that fit them for this key role in ensuring effective governance in the formation and management of commercial policies and trading relationships. Others have some elements of the required skills, but must acquire more if they are to deliver enhanced value. Again, this is better enabled if you are operating within a collaborative, shared services structure. Whether we look at this from a functional or a personal viewpoint, the challenge for many is the issue of leadership and credibility. Therefore, among the questions you might ask as you ponder your future are:
 
        Do you have the functional leaders who are prepared to put their heads above the parapet and position themselves for this critical role?
        Have you prompted those leaders, encouraged them by demonstrating your readiness for the challenge?
       What evidence do you have to show your readiness for these tough times, or the steps you are taking to differentiate yourself from those around you?
 
Times of great uncertainty are also times of change — and therefore represent opportunity. But those opportunities do not simply seek out those who sit and wait. They fall to the people who demonstrate their readiness to bring solutions, to drive improvement and ensure economic survival for their company.
 
So the final attributes that can get you noticed are those of determination and innovation — taking the initiative, promoting new and improved ideas, demonstrating personal commitment. These are all areas where IACCM can help — indeed, is helping many individuals and functional groups right now. At times like this, the true leaders draw on their networking skills, discover and develop ideas, equip themselves with the facts and the data that get them — and their people – to a position of greater status and security.
 
Tim Cummins, CEO, IACCM.
 
Discover more about how IACCM can help by writing to info@iaccm.com and outlining the challenges you would like to tackle. In addition to advisory services, IACCM can assist with research, benchmarking, training, professional certification, networking, job search, process design and many other areas of personal development or organizational capability.
 
 

 


 

 

 

 


 

 

The role of a contract manager

 
This article provides an answer— both in terms of the traditional areas of responsibility and with a view of how the contract manager role is emerging to take on a more strategic, change management focus that will increase the visibility of contracts and commercial managers. But gaining this growing status has a condition — it is a readiness to show personal leadership and to confront tough (sometimes unpopular) decisions.
 
 
There are frequent web searches that look for definitions of “contract manager roles” or “contract manager responsibilities”. This article, taken from the Commitment Matters blog, provides an answer, both in terms of the traditional areas of responsibility and with a view of how the role is emerging to take on a more strategic, change management focus that will increase the visibility of contracts and commercial managers. But gaining this growing status has a condition — it is a readiness to show personal leadership and to confront tough (sometimes unpopular) decisions.
 
Many people still seem puzzled by the role of a contract manager. It is a frequently asked question and recently generated significant debate on the IACCM website’s Contract Management Forum.
 
Among contract managers themselves, there is widespread belief that the title (and its variants, such as “commercial manager”) masks massive variations in job role, status and responsibilities. Hence it is often felt that external hiring (especially across industries or geographies) will be difficult, if not impossible.
 
How great are those differences? In fact, our research suggests that the core responsibilities of contract managers (and by deduction, contract management departments) are very similar. Drawing from the postings on the IACCM Contract Management Forum, these might be summarized as follows:
 
Responsibilities include:
 
         Contracts (various: including formal, short form, and annual contracts)—drafting, evaluation, negotiation and execution:
— non disclosure agreements, sales / purchasing agreements, sub-contracts, consulting agreements, licensing agreements, master agreements, review of customer proposed terms and conditions;
— distribution agreements (resellers, agents, joint marketing etc.);
— commercial and public (federal, state and local municipalities) contracting.
        Serve as the point of contact for customers on contractual matters. Act as contractual “middleman” between company employees and customers, ensuring timely review and approval / reconciliation of variations.
         On all standard and non-standard contracts, provide redlined recommendations and often negotiate directly with our customer’s attorneys or purchasing staff until consensus has been reached
         Maintain contractual records and documentation, such as receipt and control of all contract correspondence, customer contact information sheets, contractual changes, status reports and other documents for all projects.
         As needed, provide guidance on contract matters to project managers, including training to new project managers and other employees in contracting procedures.
         Develop and implement procedures for contract management and administration in compliance with company policy. As appropriate, contribute to or influence company policies.
         Monitor compliance by company employees with established procedures.
         Work with risk management department to coordinate contractual insurance requirements.
         Work with finance to ensure adherence to broader finance and risk requirements such as revenue recognition, pricing and discounting policies,, export controls and so on. May include “financial engineering” and understanding / evaluating the economic impact of terms and term options.
         Support product management/marketing to ensure company products and services are offered with appropriate, competitive terms and conditions.
         Monitor competitive terms. Monitor customer satisfaction with our terms and conditions and contracting practices. Recommend changes.
        Ensure that signed contracts are communicated to all relevant parties to provide contract visibility and awareness, interpretation to support implementation.
         Handle on-going issue and change management.
         Monitor transaction compliance (milestones, deliverables, invoicing and so on.)
        Oversee service level agreement compliance.
         Ensure contract close-out, extension or renewal.
 
While these responsibilities are written from the perspective of a contract manager supporting sales (which is where there is a longer history for the role), they are easily converted to a description for procurement, where the tasks are very similar.
 
It is true that the emphasis within this list will vary. For example, some groups have little or no responsibility up to the point of contract signature; and others little or no role after signature (though there is a marked trend towards consolidation of pre- and post- responsibilities within the same group). The reporting line also makes a difference, with groups reporting to Legal tending to have a narrower set of tasks (potentially little responsibility for non-legal aspects of the contract or related policies and procedures, especially in terms of any financial accountability). Geography has certainly been a major factor in the past, with few contract managers visible in non-common law countries. However, this is also changing as business globalizes and contract forms and procedures grow more consistent.
 
One of the biggest differences between organizations lies in the extent of authority and accountability that contract managers have for making contract changes. Another big difference is the extent to which the contracts organization has solely deal-based responsibility, versus a more strategic role in overall company policy and commercial / contractual strategy. For example, does the function simply implement and protect other people’s rules, or does it advocate change and participate in key policy discussions?
 
Today’s “best practice” contracts groups are those with a holistic responsibility for the contracting process (pre- and post- award). They are increasingly involved in establishing contracting policies that support market and business strategy — and this is something that cannot readily be done if resources are fragmented. As a Professor of Economics at one of the major UK business schools recently commented: “The value of contracts is in the outcomes they produce.” He also observed that today’s contracts are becoming more complex and the risks of failure more severe.
 
Too often, companies have had no one providing the oversight for achieving those outcomes or managing that complexity and risk – and that is why the role of contract manager is emerging as a critical competency in today’s organizations. It is also why contract managers themselves need to start focusing less on what makes them different, and more on recognizing that there is a common and consistent core of activities that underlie their role and professionalism.
 
 

 


 

 

Quality of leadership - leaders, providers and academics share their views on how our contracting community is faring in the areas of leadership and strategy - Practitioners' Responses

 
Practitioners’ responses Leading practitioners share their views with IACCM on what leadership means to them, what it should mean; and the strategies they are following. Their views are a call to action, while recognizing the practical constraints facing our profession.
 
 
Practitioners’ responses 
There is universal agreement that workloads have increased, often with less resources available; and the role of the function is changing to reflect a more complex operating environment, as a result of which the contracting/commercial function is assuming a more integral role in the organization, often with a growing strategic and global focus. That means greater demands — and opportunities — for leadership.
 
Gabriel Buigas, Deputy General Counsel at Hewlett-Packard, puts this down to a number of factors: doing more with less resources; the difficulty of eliminating low-end work in the system; having the department (which covers both legal and contracts at HP) assume a more strategic role; increasing the time invested in working with senior staff from other functions and the businesses in helping to drive more strategic decisions.
 
For Tom Larkin, COO of Supply Management at Credit-Suisse, key pressure points are growing emphasis on risk mitigation and business continuity, especially in light of the current global financial crisis. Also, a more global awareness of the pitfalls of outsourcing means managing more complex business relationships, which calls for more in-depth skills, and also places emphasis on the need for supply management to act as key advisers to management.
 
Mike Marshall, Head of Commercial, Programmes & Support and International, BAE Systems, offered opinions that represent the sales-side. He believes the role of the function has changed over the past few years to ensure his area is seen as an integral member of the project team rather than a silo or obstacle to getting business closed. This has meant increasingly active involvement from the very earliest stages of the project — rather than at bid time — when it is often too late to optimize commercial’s added value. This view is echoed by Chris Mead, Commercial Director at QinetiQ. Chris oversees an integrated group of both sell-side and buy-side commercial staff and project managers. He feels this integration has helped them cope with an ever-increasing workload, caused by larger deals and a more complex public procurement environment.
 
All agree there is a need for a continued change of focus, and in a range of areas —including sustainable business models, compliance and ethics, developing more strategic partnerships and risk assessment.
 
Patrick Callioni, believes there is a need to focus more on sustainable business models and people management practices, as well as understanding that competition and collaboration are not mutually exclusive. He was also one of several who commented on the challenges of long-term contracts and the frequency of change. This has raised the status and importance of post-award contract and relationship management, and driven executive awareness of the cost of failed projects. For many, these changes have caused a greater focus on the overall process integration and the alignment of resources throughout the life-cycle of the deal or relationship.
 
Reflecting the broader concerns over workload and pressure on resources, several of those interviewed feel that too much time is spent on the buying/selling of commoditized products and not enough time on strategic partnerships: as one observed, “Most enterprise companies spend too much time negotiating non-value added matters. We (as an industry) can’t seem to stop the madness between the disconnect on the procurements and sales motions that cause a lot of churn. We should be spending more time on strategic partnerships/alliances and also on some key compliance matters as regulators increasingly focus on corporate behaviour.” This transition is seen as one of the biggest challenges requiring leadership. And to succeed, staff must be motivated by a clear vision and goals, which also require new support mechanisms and tools.
 
According to one executive, the need for a change of focus is mainly in the areas of outsourcing and assessing risk: “More and more companies are ‘putting all of their eggs in outsourcing baskets’ and leaving themselves vulnerable to issues like the current Satyam and Wipro debacles.” He observes that sourcing and supply chain experts have often been by-standers in the selection and negotiation of these critical relationships, or are included only at certain points in the process. Now, the weaknesses in many of these deals is becoming evident — and sourcing and supply chain are being called upon to clean things up.
 
The common view was that “these changes take time to embed throughout an organisation as large as ours”, and several participants also commented on the challenge of driving consistent change in their worldwide operations.
Among the challenges from the changes identified is the need to develop people with skill sets that enable them to operate effectively across cultures and in genuinely collaborative ways; and for the development of appropriate automation and robust contract management systems.
 
Gabriel Buigas sees a continuing need for people who are skilled at complex, custom solution offerings and who know how to bring such deals together during the negotiation process. And from a tools perspective, there is much that is lacking in terms of automation or even robust contracts management systems. He remarks, “I continue to be unimpressed by what most folks tout as being a breakthrough or leading edge practice in the application space.”
 
The major challenges, according Thomas Larkin, will be in having globally minded individuals addressing the problems. While many companies believe they have a global approach, they often force the central rules and regulations onto the foreign offices. The future requirements will be to have a skill set that embraces and reconciles all of the local customs and guidelines and balances these against the corporate culture and future vision. Further, Christopher Mead adds that the challenge is finding experienced commercial staff with a genuinely collaborative behaviour set.
 
Mike Marshall believes it is paramount for the commercial contracts staff to work closely with the other key functions. His department drafted a “Commercial Role” document, which clarifies the roles and responsibilities, and was agreed with the other functions. Embedding the key messages in training and communications is important,; and several of those interviewed observed that it is also necessary to maintain regular reviews and updates of roles and interfaces, to be sure they are adjusted to fast changing business conditions and needs.
 
Patrick Callioni suggests the following as further reading, which discusses the conceptual and practical aspects of the challenges to this question: http://www.ske.org.au/downloads/EPM_Trends_Feb_2007.pdf
That a networked world requires greater collaboration, both internally between functions and externally with key providers and customers, was unanimous; and in the view of some, made more urgent due to cost cutting and downsizing.
 
While Gabriel Buigas agrees that the current environment requires better collaboration, both internally and externally, he sees additional challenges from the use of virtual work teams. He is therefore uncertain whether the pressure to improve collaboration is coming from market forces, or as a result of cost cutting initiatives.
 
Thomas Larkin daily sees the need for individuals to help navigate through problems associated with the increasingly networked world, but he also sees a tremendous amount of internal retrenching, where business groups are trying to do things themselves because over-taxed support organizations are suffering from downsizings. A balance needs to be maintained where the contractual groups and the business groups work collaboratively to drive the aims of the corporation.
 
One person described its global commercial functional plan for 2009, which aligns with the corporate strategy, and includes such items as people development/leadership and development initiatives in policy and process and communications; it also covers more localised plans for other countries or geographic regions.
 
Christopher Mead and Patrick Callioni both feel strongly that the increasingly networked world raises the importance of the behaviours exhibited in successful contracting. Patrick adds that a networked world needs new models of competition that do not rely on social Darwinism, but, rather, recognizing that co-evolution — not tooth and claw competition — is the key to progress. See http://www.nonzero.org/.
These leaders characterize ‘leadership’ as it relates to their function, and explore what it means to them. They discuss characteristics integral to good leadership, which in turn are necessary for a healthy organization. Key areas are clarity of vision, excellent communications, a commitment to fairness and evident influence with senior management.
 
Patrick Callioni says: “I lead by example — for me there is no other way. Successful leadership is when people do what needs to be done without being told and when rhetoric and practice are aligned. I cover that in a chapter of my book, Compliance and Regulation in the International Financial Services Industry. For example, we need to understand how to build trust, and this is not easy, though it can be done, using models such as this, which help us to understand that openness and (perceived) fairness are the ingredients that create trust, while secrecy and perceived unfairness tend to destroy trust. In organizations with low trust, communication will be poor, initiative, creativity and morale will be low, and management will tend to resort to command and control methods, which tend to generate lower levels of productivity and are deeply unpopular with generation Y workers in particular, and knowledge workers in general.”
 
For Gabriel Buigas: “Successful leadership paints a clear picture as to where to drive an organization in terms of maximizing value/positioning and then can drive a team to achieve the goal. This requires being an effective communicator/advocate, being able to have influence at senior levels and then creating an organization that can deliver on its plans. Success looks like a clear understanding as to strategy/objectives, a talented team of professionals that can get you there and validation from the businesses/other functions that you are operating at a high level.
 
“There are two elements of leadership in my area,” says Thomas Larkin — “internal to the employee and external to the business/supply groups. Internally, the leadership needs to present a vision for efficient and proactive risk management that fosters the development of skills and takes risks, in order to be ahead of the changes in the contracting fields. Externally, leadership provides the vision of strength and unity where the needs of the business are balanced successfully against the cost/risk management requirements of the organization as a whole. The best analogy of leadership I know comes from Ken Blanchard in a seminar he taught in the 1990s:”
 
“In business there are leaders, managers and workers. Take the example of cutting a road through the forest. The workers just need to make sure they have their daily orders, their saws are sharpened and their work environment is safe. The manager is responsible to make the daily plans, sharpen the saws (e.g.: training), and send progress reports to management. The leaders are the ones who climb the highest tree, see where they are going and where they need to go, and yell down “You’re going the wrong way!” That is when the managers yell back, “Shut up! We’re making good time!”
 
BAE Systems is developing a program to develop future commercial leaders. Mike Marshall reports: “We do see succession-planning issues which require active management, particularly leveraging the multinational nature of our organisation. Although there are function-specific issues which require us to lead on effectively, the key attributes and competencies of leaders are, in my view, common to all leaders in an organization such as ours, independent of the function they come from, whether they be they people management, setting goals, delegating, or communicating effectively.”
 
For Christopher Mead, the slow pace of change in behaviours is evidence of weak leadership. He says, “I believe a good leader motivates, inspires and enables his or her team to achieve. They come in all shapes and sizes, but everyone can recognise a good leader when they see one!’
The majority have a documented strategy for their function.
 
One respondent’s function addresses financial goals/operational goals/customer goals and employee goals; another’s covers the entire third-party supplier relationship and contractual obligation between the organization and its supply base; and a third has a documented mission and vision statement, but feels that it needs to build more on the overall strategy.
All see the role of their function becoming more important in the year ahead. There are various reasons for this, but principally it is due to a growing need and influence within their organization, which results in a less tactical, more strategic, focus.
 
Patrick Callioni confirms this when he describes how his organization is becoming more influential and closer to the centre of strategic priorities. The Government has recognized that procurement/sourcing is more than just buying stuff and issuing purchase orders; complex projects need far more analysis and disciplined oversight if they are to deliver successful outcomes.
 
At Hewlett Packard, Gabriel Buigas reports that legal is playing a key role in major policy initiatives, with key alliances and on the most significant compliance challenges the company faces.
 
Thomas Larkin sees the role of procurement and supply chain being more important as time progresses. He notes that the increase in risk and cost management will require the contractual and sourcing-related activities to be better harmonized, globalized and standardized for increased efficiency.
 
According to Christopher Mead, the commercial function is clearly becoming more important. “Line managers increasingly see it as the cavalry when they are in trouble and the experts for closing out complex deals.”
 
The overwhelming view is that there is a lack of talent in terms of current and future leaders.
 
Patrick Callioni: “In Australia, and particularly in the public sector, we have a problem. However, it is a subset of a bigger problem, because the quality of management in this country is not adequate and little is being done to address that.”
 
Gabriel Buigas has seen much more progress in legal than he feels is evident in contracts or sourcing areas. “I think the contracts area faces the biggest challenge in terms of leadership skills and really adding value at a strategic level, as opposed to being very tactical and reactive.”
 
Thomas Larkin reiterates that there is a lack of talent in global thinking and does not see enough of this skill being developed among current university graduates or within businesses. Christopher Mead is in agreement, with the view that outstanding talent seems thin on the ground.
On the role that IACCM should play to help the contracting community in the areas of strategy and leadership, and on how well it is doing, the expectations varied.
 
Patrick Callioni believes that IACCM can sensitize organizations and senior management/politicians to the importance of these issues and can then help to create collaborative, whole-of-economy solutions — “because that is the only way we can achieve sustainable change for the better”. Christopher Mead, agrees, seeing IACCM as providing a forum for thought leadership to inform the emerging leaders.
 
Gabriel Buigas continues to rely on IACCM for thought leadership and for visibility as to what leading companies are doing, but observes that the Association must ensure speed of execution in the implementation of key initiatives.
 
Thomas Larkin feels that IACCM should help to raise the benchmark for the minimum acceptable standards of strategy and leadership within this field. It should not be content with just having members meet to share ideas, but also continue to point the direction for emerging trends and long-term improvements. He says, “Each year we should be finding new roads to travel down that broaden the skills in both strategy and leadership.” On the question of how is IACCM doing? Thomas says it is on the right path, but it is waiting for the nudge to move forward. “I need a leader in thought as well as execution to help push my company out of its comfort zone. IACCM is not currently selling to my peers as well as it needs to.” However, Tom has no hesitation in recommending IACCM to others: “I would and have, as I think that IACCM is farther ahead than its nearest competitor.”
 
Mike Marshall personally sees IACCM as doing an excellent job in exposing best practices and industry trends, and also for its surveys and as a vehicle for networking. He says, “I would like it to enhance its academic credentials on the training front by association with an academic body (or more than one, for each key region represented). Also, people often seem to get confused about what the “CC” in IACCM really means. “Commercial” means very different things to different people. While “Procurement”, “Legal” and “Sales-side Commercial” have plenty of issues in common, I wonder if IACCM sometimes dilutes or even misdirects its messages when all three areas are taken into account.”
There was unanimous recommendation of this field to younger people for the interesting job opportunities it offers and as a potential career path for leaders of the future.
 
Patrick Callioni summed up the general sentiment when he observed: (The world of contracting) is a good place to be, “Because as the world becomes more complex, those who can design, implement and manage complex stakeholder networks can be powerful and influential in any field, and that is what this role is all about.”
 
Brett Pauly, Director, Service Provider, Commercial Office, Cisco responds to the questions from the standpoint of the customer-facing contracting function; and
David Connor, General Manager, Supply Chain Upstream at Chevron responds to the questions from the standpoint of procurement.
1. Has the workload and / or role of your function changed significantly in the last few years - and if so, how?
 
Brett Pauly: Yes. I think that the expectations of our service provider (SP) customers have risen dramatically. This, I think is due to two factors. First is the consolidation in the Service Provider industry. We have fewer, but larger, customers, who expect even better terms. Second, is that Cisco’s relevance in this market has really increased. We are no longer “under the radar.” IP is no longer an experiment for SPs — it is now the primary technology that their business is based upon. All of these heightened expectations have resulted in a much more challenging set of terms that we are being asked to sign, and much more strain on the contracting function.
 
David Connor: Yes it has grown as we have become more integrated with our business partners — strategic sourcing, contract planning, and governance and compliance are three areas of significant growth
2. Do you see the need for continued change of focus - and if so, in what areas?
 
Brett Pauly: I think that Cisco in general, and the legal function in particular, are very good at doing the core versus the context type of thinking. This is an ongoing exercise that has helped us off load items like Non-Disclosure Agreements, and to automate many other redundant functions like contract creation and on-line approvals.
 
David Connor: We have a road map that takes us to current definition of world class performance, but of course the bar keeps rising and I expect we will continue to refocus every two or three years as part of the strategic planning process
3. What major challenges will result from any changes you have identified — for example, skills, resources, tools — and how will they be addressed?
 
Brett Pauly: On the theme of “leadership,” I think that this works two ways: First, we need leadership within the company to help all of our functions continue to evolve with the market, and with new business models. That’s where my commercial office function comes in. Second, where we need to push back and hold our ground, we really need the leadership from the sales executives to not merely be great advocates for their customers within Cisco, but also to be great advocates for Cisco within their customers. We need to arm them with all the right information and positioning to make them successful in that endeavor.
 
David Connor: Increased use of technology requires new skills or more outsourcing, balancing need for MBA level skills and experience, especially front line customer facing experience on our teams, processes becoming more standard which encourages more use of technology, collaboration and joint innovation with suppliers rather than confrontation
4. Many commentators suggest that a networked world requires greater collaboration — both internally between functions and externally with key providers and customers. Do you agree and, if so, how do you see this affecting the way you interface with other internal groups? Do you foresee significant organizational changes and consolidations?
 
Brett Pauly: Absolutely, I am very passionate about this. The effectiveness of the negotiation is often determined by how well the parties collaborate. We use many tools very liberally, such as Webex Connect, Livelink and Telepresence to help us be successful with this. The videoconferencing tools have increased in their importance ever since we (like many other companies) instituted a travel freeze on any internal meetings.
 
David Connor: Internal service providers (IT/HR/procurement/legal/finance) will collaborate and standardize their approach to support the business — may be part of a shared service team leveraging best practices across functions.
5. How would you characterize ‘leadership’ as it relates to your function? What does successful leadership look like?
 
Brett Pauly: In addition to the points that I made in No. 3 above, I think that there is a traditional human part of the leadership equation — the development and coaching of people, keeping everyone motivated and passionate about what they are doing and, of course, setting the long-term vision for the group.
 
David Connor: Dynamic leaders demonstrating integrity and driving functional excellence, at the right level in the C team working in partnership with the business but clearly owning the function and the processes
6. Does your function have a documented strategy? What are the major components that it covers?
 
Brett Pauly: Each function here has what we call a “VSE,” which covers the long-term “vision” of the group, the differentiated “strategy”, and then what tactical points we are going to “execute” on.
 
David Connor: Yes, much of it has been covered above already —we have strategies for governance, planning, category management, transactional operations, electronic procurement/contract management and compliance
7. Overall, do you see the role of your function becoming more important or less important in the year ahead — and in what ways?
 
Brett Pauly: I think that this role is going to continue being more important over time. The complexity keeps increasing, and no matter what, there will always be a need for experienced people to negotiate and resolve issues on sales deals.
 
David Connor: This is our time! All the work we have done transforming our function in many companies is now paying dividends — the leading-edge processes and tools we have developed are more obvious to our companies in a climate of cost management/reduction - planning, category management, market intelligence, cost analysis, multiple rounds of negotiation with qualified suppliers, supplier relationship management - all are of obvious value now to our leaders and are being embraced!
8. Based on your experience related to the contracts/legal/sourcing function, do you feel that there is a lack of talent in terms of current leaders and leaders of the future?
 
Brett Pauly: No. I think there is plenty of talent in this area. Over time, there may be some mindset changes that are required to be successful, but that is part of a natural evolution, and no different to any other function.
 
David Connor: In current leaders, yes. There is still room for improvement; but thanks to our hiring and development programs, including the use of the IACCM programs, we have been set up well for the future.
9. When it comes to strategy and leadership, what role do you see a professional association like IACCM playing to help you succeed? How well are we doing?
 
Brett Pauly: I really appreciate IACCM and what you are doing. I think that IACCM is most effective when it focuses on items that help us close deals quicker. For example, the standardized “Ts and Cs” exercise has the potential to be a mammoth breakthrough for our industry and others.
David Connor: Identifying world-class process, driving innovation, challenging the status quo, and reinforcing the professionalism of our function.
10. You understand the community that IACCM represents. Would you recommend this field to younger people — does it offer interesting job opportunities and a potential career path for leaders of the future?
 
Brett Pauly: I think it definitely does. It’s a wonderful place to get a broad view of the business. In order to negotiate a contract, you really need to have a working knowledge of every group that touches the customer. It’s a great way to really gain a holistic view of the company, and it’s a natural springboard to other things.
 
David Connor: For the first time, our function has risen above the view held by some that we are a dumping ground for the failures in other functions — we are now viewed as a new but essential function that adds significant value.
 
 

Quality of leadership - leaders, providers and academics share their views on how our contracting community is faring in the areas of leadership and strategy - Providers' Responses

 
Providers’ responses Providers to the contracting, procurement and legal community gain a range of insights to the quality of leadership and strategy. In some cases, they are providing consultancy to assist in functional effectiveness or efficiency. In others, they offer software products that may similarly aid efficiency, but could also drive superior management information. In both cases, they gain visibility to the vision and ambition of the current leadership and their potential heirs. And the opinions they provide reveal major diversity.
 
 
Providers’ responses
 
In the opinion of one provider,I would rate the quality of leadership and strategy within these groups as extremely poor. Out of the lot, legal is probably the worst.” And another stated: “We seem to hear endlessly about how procurement has ‘made it to the top table’, and how today’s contracts procurement office (CPO) is part of the core strategic team. Well, if they are there, why do they still need to write about it? This supposed leadership and strategic influence is definitely the exception; and few CPOs seem up to the task of making a real difference.”
 
Overall, many contracts, commercial, procurement and legal groups are perceived as driven by transactional and deal-based activity, which often results in their failure to perceive strategic issues or opportunities. “They may be great in handling crises or responding to management panics,” observed one provider, “But they are not so good at preventing the crises and panics from happening in the first place. In part, that is a failure of their leadership. But we must also remember that it is a failure of executive management to demand more and better.”
 
Yet there are others in the provider community who see signs of real improvement and growing understanding by functional leaders of the role they must play in driving change — not only within their own organization, but across the enterprise and beyond, into trading partners. Several see the most hopeful signs coming from the general counsel. “They really are on the hook for risk and regulatory issues. They cannot just throw money at the problems. They cannot simply exhort their people to work longer hours. Those with vision are grasping the need for a fundamental shift in the way legal work is performed and in the visibility they have to what is going on within the corporation.”
 
There is a third group, largely consisting of providers who offer relatively traditional solutions, that sees no real problems with current strategy or leadership. Following are their responses to the following questions.
 
1. Based on your experience, how would you rate the quality of leadership and strategy in the contracts / procurement / legal groups with which you deal? What do you see as some of the most common shortcomings and what have you observed in terms of “excellence”?
 
Discussion with the provider community yielded from most a sense of frustration and to some extent confusion. Understandably, they would like to see a greater sense of hunger and urgency for change — after all, this would result in higher demand for their services and offerings. But many translate this lack of appetite as representing a failure of vision and an overly-cautious approach to business needs.
 
“It is surprisingly hard to see patterns,” commented one seasoned provider. “Part of the problem seems to be that there is no accepted model for contracting and relationship management, and this makes many timid to take the first step. Doing nothing seems a safe option.” This observation — and the words used — implies a lack of leadership.
 
But Ashif Mawji, President of Upside Software, does not agree. While he certainly sees room for improvement, in his opinion: “The quality of the leadership and strategy has definitely increased in the last two years and at this time I would rate it at about 7.5 out of 10. I firmly believe the IACCM has helped to raise awareness of the contracting discipline and has helped many organizations gain relevance in this area. IACCM has also helped to show management the importance of the contracting group and the overall value it can add to an organizations’ bottom line.”
 
Why is it that some organizations “get it”, while others appear mired in increasing workload and falling morale? One reason seems to be the readiness of management to grasp the extent and nature of the changes going on around them. According to one top consultant “Business relationships have become far more diverse and complex. Bid management, contracts, negotiations and performance management have become far more critical to business results and managing risk. Yet far too many functional heads remain wedded to the world of commodities, compliance and transactional thinking. They are overwhelmed by workload, but cannot grasp that they need to do things differently.”
 
The more common shortcomings highlighted by the providers include:
 
        a tactical approach to negotiation as opposed to securing a long-term win-win relationship, and understanding the need for improved planning and process;
        a “one size fits all” approach to contracts that fails to segment relationship types and offer different solutions based on factors such as complexity, strategic importance, duration and so on;
        contracting competence is not given high visibility in the overall company go- to-market strategies (in part because no one is pushing this agenda and demonstrating the connection between shifting market needs or conditions and flexible commitment capabilities or requirements);
      no “C” level is directly in charge of the contracting or commercial process (more often, contracting falls under legal, finance or procurement and is focused primarily on compliance and exception management); and
        measures of performance are either missing or inappropriate, so no one realizes just how much better things could be.
        However, there are bright spots and Ashif Mawji is once again at the forefront in describing “areas of excellence“ that he is observing with increased frequency:
       a strategic desire to simplify contracts, including language, and ensuring mutually favorable terms (to help reduce negotiation time);
       an increasing importance and visibility is being given to the contracting group, especially in North America, but also now in other regions; and
        increased collaboration with suppliers and customers in improving contracting processes (because this can shorten cycle times, reduce claims and confrontation and lead to far more innovative, productive relationships).
 
How do providers see changes in role and requirements impacting the nature of their offerings?
 
Many providers are themselves wrestling to adjust to the impacts of a networked world, and to amend or upgrade their products and services to reflect the challenges and potential that it offers. For example, software providers recognize the need for much more diverse management information, giving insights to a wider set of performance data. Others remain focused on the demands of improved risk management and regulatory change, and assume that this will increase the “policing” role of groups like contracts, procurement and legal.
 
For forward-thinking providers, it can be a struggle to reconcile the needs of the leaders with the perceptions of most others. Gregg Barrett of Cylon Solutions expresses this when he observes: “In many respects (our) product has capabilities that exceed the general maturity level of many organisations. However, the product was developed in conjunction with demands from the market place, which indicates the disparity in practices in terms of efficiency and effectiveness of those leading firms, compared to those that are just ‘getting with the program’ or are still yet to adopt it.”
 
Several providers highlighted the importance of better alignment with customers, and a readiness to provide strategic guidance in areas such as contracting excellence. But because ownership of this topic is so varied, it demands flexibility in terms of focus. Ashif Mawji, for example, commented that: “We are changing go-to-market strategies to target the contracting groups more directly, as opposed to going through procurement or finance.“
 
Several providers noted that leading organizations are driving a lot of development in processes and systems that offer collaboration and flexibility while providing control; and this includes a strong focus on ease of use /user friendliness, and also more general user empowerment.
 
Providers’ opinions on the role of IACCM when it comes to strategy and leadership, and helping companies succeed, and how well it is doing
 
“IACCM is addressing areas that have long been overlooked,” states one provider. “That is partly because those areas just weren’t so important in the past, but also because the tools and systems to do things better just didn’t exist. IACCM is doing a great job of highlighting the problems and the opportunities. But it could do better at reaching top executives.”
 
This comment once more reflects the feeling among many providers that today’s functional heads are often too slow to grasp the need for change and to demonstrate the leadership needed to respond.
 
Ashif Mawji once more describes the role that he would like IACCM to play. “I think IACCM should be a fundamental part in any organization’s plan for contracting excellence. Companies need to work with IACCM to help them benchmark and improve, as well as come up with a game plan to increase their group’s awareness at the leadership levels. I think IACCM has done a remarkable job thus far in helping raise the awareness and importance of the contracting community and the contracts process.”
 
Greg Barrett is also pleased with the contribution we are making: “It is great to see that IACCM looks at itself in the mirror — too many associations just never do it and therefore go the way of history.
 
“I see IACCM playing a major role in thought leadership, a source of guidance to those wanting to know what to do and how to do it, and for those leading the pack, the IACCM is the source of benchmarking.”
 
How providers see the community that IACCM represents. Would they recommend this field to younger people as offering interesting job opportunities and a potential career path for leaders of the future?
 
All those interviewed are confident that the world of contracting and relationship management is a good place to be, reflecting the consistent findings of groups like McKinsey. They see it as offering “a career filled with exciting opportunities and diversity, allowing for unlimited growth”.
 
Many make the point that the growing strategic importance of contracting will make it a training ground for future corporate leaders, providing broad cross-functional insights as well as the ability to better understand markets and risk. One of those interviewed summed up the opportunity, “Organisations that will succeed will be those with the strongest value chains. These value chains are built and managed on the basis of relationships. One would like to think our community is well positioned to play a leading role in this successful positioning of the organization and the building of these relationships.”
 
However, another issued a stark warning of what may happen if we fail to make this an attractive and compelling area: “If our community does not stand up and be counted, then expect to be left on the sidelines. Contracting and procurement tend to be tactical and transactional. This situation —whether it is reality or perception — inevitably limits the value placed on the function by executive management, and hence its influence and status. Inevitably this limits career opportunity, the quality of people attracted and also creates threats to the question of whether this should be a ‘retained’ or ‘core’ activity.
 
“If these functions simply automated their respective transactional processes, they would have more time to focus on more strategic value-adding activities providing executive management with ample evidence of the importance of their role, and in so doing would in all likelihood attain greater status, budget, and attract better talent. Being stuck in transactional firefighting simply leads one all the quicker down the road to low-cost outsourcing.” 
 
 

Quality of leadership - leaders, providers and academics share their views on how our contracting community is faring in the areas of leadership and strategy - Academics' Responses

 
Academics’ responses Leading academics in the field of commercial, legal and supply chain / procurement discuss the trends they are observing in the area of leadership and strategy, and share their thoughts on how they may affect academic research and training of students in our field.
 
 
Academics’ responses
 
 
Robert Handfield, North Carolina State University:
 
To my mind, true leadership is a function of the ability to listen to people more intensely, and gather as much data as possible from as many diverse sources as you are able in a reasonable time frame.
 
Second, the ability to truly understand the business issue — that is, everyone understands a process map! Seek first to understand what is really going on before making a decision.
 
Third, the ability to bring together teams from diverse global cultures, and drive leadership thinking and skills into your organization is fundamental. I see this in my MBA project teams — I drive these students to deal with new situations, new team members from diverse cultures, and bond together as a team to achieve the project scope and deliverables — knowing that they are all in it together! They learn about leadership through the challenges they face in working with one another towards a common objective.
 
Fourth, strategy is about pulling together an uncertain, fuzzy situation, and driving boundaries around it, thus establishing a “plan”. Planning is one of the biggest shortfalls that I see — in the words of Dwight D. Eisenhower, “Every great strategy ultimately boils down to hard work”. Strategy isn’t about conceptualizing what might be, but actually deploying what the desired objective is through tactical components, short-term wins, and constant communication, reinforced by metrics that illustrate that strategy is working.
 
Finally, globalization is a team sport — we need to start thinking that way. Collaboration is a process, it is not just a nice fuzzy word — so until we start mapping out how we engage and manage relationships, and establish mutually beneficial outcomes, we are all just pretending.
 
Rene Henschel University of Aarhus, Denmark:
 
My feeling is that many contract/commitment managers do lack leadership. Often, the “leaders” are afraid of taking the said role, based on the transactional view of their role — they simply don´t collect, systematize and analyze their knowledge properly, for example, in outsourcing and supply chain management, and take this to the next levels in the organization. This is often due to a lack of monitoring systems — making it an ad hoc low-level leadership, not high-level strategic leadership based on reliable data. The upper levels in the organisation don’t make proper use of the knowledge they could, or should, get from the contract managers — they simply don’t know it exists!! So its two sides of the coin, I guess.
 
But: when organisations are faced with the challenge of implementing monitoring systems and other formal systems supporting leadership, they fear the results and the disorder the changes will cause; therefore, leadership also means a willingness to take a risk — and in a risk-averse community, this can be a problem. For example, lawyers are not in a profession which is known to be one of the most changed, open-minded professions in the world (speaking with a law-background myself, I know what I’m talking about — if it works, why change it? Can you show me that it will work better? No? Then don’t change it).
 
I think that one of the core competences in the future will be the willingness to define and take the interface-role between internal customers and suppliers, between the organisation and the customers. Here, some of the key-competences are communication skills, coordination skills and collaboration skills. This should be based on a clear business strategy supporting this role, and leaving other roles to the other competent parts of the organization (or outsourced).
 
Contract and commitment managers can have many roles and responsibilities, and sometimes too many; the important issue is to decide which roles and responsibilities this particular organization needs for its business strategy (Is it outsourcing to India and China? If so, which core roles and responsibilities do the contract managers need, and which competences do they lack?), and then implement the necessary business plan to support the business strategy. This means that the contract management leadership must understand its role, not only in implementing strategies, but also helping to develop strategies (for example, the reason why outsourcing a task to India has not been successful; the internal costs of managing changes, quality assurance and so on. are too high — we recommend therefore this to be taken into consideration when the outsourcing strategy is developed).
 
Overall: the contract management leadership must communicate and interact with the rest of the organization, balance its roles and responsibilities with the rest of the organisation, understand the connection between business strategies and contract management strategies, and act accordingly (if they are allowed).
 
This means that academia must focus on this type of interaction, communication, coordination and collaboration skills, and conduct research and educate accordingly (for example, analyze the connection between law and economics, business strategies, outsourcing strategies and contract management strategies). This must be reflected in the universities research and curriculums. Here, an important issue is the interaction between universities and business in teaching and research (such as courses taught in collaboration between academics and business professionals, and executive MBAs where case studies by the student are part of the education).
 
Thomas Barton California Western School of Law
 
I like the analysis supplied by Rene and Robert. Rene stresses the skills of communication, coordination and collaboration. Unquestionably these have always been important to effective leadership and are even more vital to a networked world. Robert focuses on listening, data gathering, inter-cultural sensitivity and competence, plus planning. And I doubt that either business schools or law schools do very much to train students in the areas highlighted by either Rene or Robert.
 
Data gathering is probably strong in some ways at each type of school, but the questions asked (and thus the data sought) is too limited to promote truly successful leadership or strategic capabilities.
 
Here are some additional thoughts.
 
What leadership means and what it should mean
 
To me, leadership inherently means working with other people to accomplish things I cannot do alone. A leader brings out the best in others, enabling them, as individuals, to contribute to the thinking and goal formulation as well as efficient, effective implementation of goals set by the group.
 
The best leaders are those who do not treat others as commodities, but instead acknowledge that everyone has different capabilities. The best leader will try to understand the diverse individual capability profiles of those who work in the group, plus the varying incentives that may best motivate those different people.
 
Leaders should spend time with individual key personnel to uncover these particular talents and motivators. Leaders should inquire and assess. They should ask people in open-ended questions in surveys or in-periodic interviews to describe what they best have to offer, what resources they need to do that, what obstacles they currently encounter and their ideas for eliminating those obstacles, what incentives will best motivate them, and the criteria by which they are willing to be accountable and have their performance measured.
 
To the greatest extent possible, give people the latitude to be creative and to define the parameters for fairly being judged. Treating people in this way, as individuals with independent minds and diverse qualities, will prompt respect and loyalty to the leader and the organization. Just as value is created in a transaction through the differences in people’s needs, so also can harnessing the differences in personnel talent and motivation advance the overall talent that is available. The process or conversations will also generate many ideas that the leader would not alone have considered.
 
What strategies are currently being followed; and what strategies should be followed
 
For me, strategic thinking becomes ever more important as the global commercial technological and political environments become ever more volatile. The faster the changes, the more fleeting the opportunities and the more time-limited is the shelf-life of existing methods. Failing to think strategically is the riskiest of courses. Thinking strategically means being willing to imagine new needs or opportunities; to expand the functions that one is seeking to serve; to assess and reform the processes by which one discharges any function; and to reorganize or recombine assets or resources in new ways. Strategic thinking always starts with functions, because discharging functions creates value. Ask these questions:
 
        How can I, or my company, do something new that others want, or do it better?
        How can I be of help? And in doing so how can I inspire loyalty among my employees as well as clients and customers?
        How can I encourage people within or outside the organization to communicate their needs and thoughts for improvement?
       How can I inspire people to want both themselves and me to succeed?
 
Good strategy begins to merge into good leadership. Some functions that can be served through effective contracting, but that are relatively undeveloped, include:

        reducing organizational risk;
       increasing efficiency of resource use;
        aiding product development and quality control;
        and advancing internal company management and planning.
 
 
The difficulty is that, even more than effective leadership, strategic thinking requires resources of time, information, and imagination. As economies constrict, these resources may increasingly be thought marginal and available for reductions. That would be highly risky, as stated above — the most dangerous course is to keep doing what one always has done while the world changes around you.
 
Leaders need some time free of everyday demands to reflect on their organization goals and capabilities, and on the direction of the environment. Being under constant deadlines stifles creativity - it forces one to look down rather than up. Leaders also need information, such as IACCM is uniquely capable of providing. Strategic thinking is best done by putting together, periodically, those who have been coping with day-to day-operations, that is, those who have local knowledge about procedures and capabilities—plus strategic specialists or outside consultants who bring broad perspectives about the outside environment and who have the skills to facilitate broad, imaginative conversations.
 
As Robert says, people need to put strategic thinking into operation by creating formal plans.
 
        Goals should be articulated.
      Possible initiatives can be brainstormed.
        Strategies for accomplishing the initiatives can be shared.
        Fair metrics for evaluation should be devised, being mindful of the perverse incentives for counterproductive behavior that metrics sometimes cause.
        Finally, particular individuals responsible for following up the collection and reporting of progress on each incentive should be assigned and a timetable agreed for periodic meetings and re-evaluations.
 
Role of IACCM
 
Would we recommend the field of contract/commitment management to young people? Certainly, and I do that in talking to law students. Few fields have better prospects for people to exercise skills of imagination, organization, communication, collaboration, and planning than that of contract management. And those are the skills that developed economies need now and in the future.
 
 

 


 

 

 

 


 

 

 

 


 

 

Law matters — but which system is best?

 
As we look at leadership in this issue, opportunities to inculcate a more collective and professional ethic are explored — these also include the protection of rights, and consistent international standards,codes and principles. This article looks at those countries which rate well, and whether there is any universal answer.
 
 
As we look at leadership, it is essential to remember that personal status is frequently linked to social or professional connections. Group status is achieved through visible influence in the management of change and the development of standards. The IACCM community has unique opportunities to influence the global framework for trading relationships. In this article, we look beyond simple discussions of jurisdiction and governing law and focus on the principles of governance as they relate to contracting and its role in international trade.
 
It is not only lawyers who argue that the rule of law is fundamental to a flourishing society and economic welfare. Economists also recognize the critical importance of trust in creating sustainable conditions for business and trade — and that trust depends in part on having clearly accepted rules and principles that are capable of fair and objective enforcement.
 
So while business leaders may not always welcome regulation (such as, greater oversight or tighter restrictions on their actions), they do endorse the need for “the rule of law” as it relates to contract enforcement or the protection of rights (for example, patents or intellectual property). And they also realize that today’s international variations in regulatory and legal standards is a source of uncertainty and risk.
 
It is not surprising, therefore, that there is extensive interest in the spread of international standards and the development of more consistent codes and principles. But as with all forms of standardization, this immediately leads to questions such as “Which system should we use as the model?” or “Which country does this best?”
 
We have witnessed tussles over this in areas such as the adoption of consistent accounting rules and principles of corporate governance. The most visible arguments have been between the US and Europe, but today the “battle for supremacy” is extending to more general debates over who offers the “best” legal system. Of course, as the country with the world’s most lawyers, the United States inevitably lays claim to its superiority and has sought to promote its legal model as the global standard (for example, through the spread of US law schools into other countries). It cites its governance model, with clear constitutional separation of powers, as the way to safeguard good government and objective legal decisions.
 
Many disagree with this. They point to class action lawsuits, the dominance of trial lawyers, the aggressive win-lose attitudes of attorneys and the “corruption” created by lobbying and political funding. And the World Bank supports their point of view. Its analysis of governance (see http://info.worldbank.org/governance/wgi/index.asp) and, within that, specific analysis of ”the rule of law”, shows that the US is among the best — but certainly not the best.
 
That honor goes to the Nordic countries, together with Australia and New Zealand.
 
This is interesting, because work at IACCM has consistently revealed the Nordic countries as a hotbed of thought and research on issues of contracting and trade. Indeed, IACCM has extensive links with universities and business schools in Norway, Finland, Denmark and Sweden.
 
There are many hypotheses about why these countries score well in governance indices. Among these might be that they have been relatively isolated from the extremes of world economics and that their small but highly educated populations have flourished in an environment of trust and high social responsibility. Indeed, these countries have remained free from many of the extremes of capitalism and personal wealth, and are regularly used as mediators or moderators in world affairs.
 
But does this mean that they offer us a good model for governance and the rule of law, or is the model in fact solely due to specific local conditions and not truly replicable in other cultures?
 
Recent evidence would suggest that it may indeed depend on local conditions, because among this top rank of countries was Iceland — which sadly let itself become infected by the financial governance inadequacies that caused the crumbling of the economies of the United States and United Kingdom. So if “unbridled capitalism” is unleashed, even these systems prove inadequate to control it.
 
However, this does not alter the fact that the Scandinavian countries have sustained a governance model that breeds an environment of trust and relative stability. And it seems probable that academic and business interest in the use of contracts and commercial policies in overseeing successful business relationships is in some way linked to this overall leadership in the Global Governance Tables.
 
So as we search for models as a basis for developing greater international consistency in contracting and terms and conditions, we should maybe focus on the countries that lead the world in governance and the rule of law. Perhaps they have discovered secrets and methods that would assist us all in developing a framework of trust for our trading relationships.
 
And if we truly wish to build consensus and a common framework, we must also accept that no-one has a monopoly on truth. Good ideas can come from anywhere and everywhere — a global standard must be open to shared influence and an openness to excellence, not subject to domination by those with the loudest voice, the greatest power or the longest traditions.
 
That is why the unique community that has joined together to establish IACCM has the potential to show leadership in such fundamental issues as the framework for improved trading terms and conditions and the development of global standards for the integrity and oversight of trading relationships.
 
 

 


 

 

 

Thoughts not entirely outside contracting, from Jason Anderman’s visit to Cambodia in December 2008

 

The Angkor temples comprise the region that was the ancient capital of the Khmer empire. There are many different temples, sites and complexes, the most famous being Angkor Wat. Many of the temples were originally built for the Hindu religion, but as Cambodia became more of a Buddhist nation, the temples were converted to focus on Buddhist iconography. The temples are particularly famous for their large murals depicting battles and creation, as well as statues of Shiva, Vishnu, Brahma, and their avatars and servants.

 

Visiting a country like Cambodia forces one to think about the importance of enforceable contracts. In Cambodia, there is very little faith that the police or the courts will reliably enforce the law. This, of course, increases the risk to investments and puts a damper on economic growth. In the years since the end of the internal strife and foreign wars that have plagued Cambodia, there has been substantial growth in construction, textiles and tourism. One wonders how much better these industries would be doing with more reliable contract enforcement mechanisms. However, there is hope, as a vigorous minority political opposition is consistently raising these issues.

 

Jason Anderman is President and Co-Founder of WhichDraft.com, where users can automatically create, customize and share contracts. Jason has previously served as in-house counsel at Becton, Dickinson and Co and practiced technology law, intellectual property licensing and health privacy law. He regularly publishes and speaks on Six Sigma, legal technology, and knowledge management.

 

 

 


 

 

From the front line

 
 
 
NDA process for field sales reps
Question:
 
I am a Contracts Manager currently working under a Legal Dept. in a high volume commercial sales environment. My team (1 attorney and 1 paralegal) has to review and negotiate a lot of nondisclosure agreements (NDAs), and I am currently exploring ways to reduce this workload, including providing our sales force with more ability to create their own agreements (we currently do not have a CMS). Our general counsel has concerns with sales people creating their own NDA’s and feels that rather than being generic, NDA’s should be specific to the discussions taking place, however this would require that someone on his team draft them.
 
I would like to hear from other members as to how their NDA process is administered so as to make it more efficient but still with proper controls in place. In addition, I’d like to know if other companies sign an NDA with a customer each time they have different exploratory discussions with that customer, or whether they have a ‘’master NDA” and all discussions with that customer can fall under the master for a certain period of time. We just have too many NDA’s and it’s hard to keep track of them from a compliance perspective.
Responses:
 
Jason Smith: I’ve got a client that manages NDAs by exception. They have a standard NDA and allow anyone in the company to use it (like a kiosk approach). Any NDAs that would need to deviate from the standard can be routed to Legal, but if someone wants to use the standard NDA (which is usually the case), they can input the relevant info and print it out. I agree with Tim that reviewing every one doesn’t mitigate risk, but rather may increase it. Turn around time is also reduced when managing by exception.
 
Mike Naughton: As the manager of NDA Central, Cisco’s system that automates the drafting, e-signature, and storage of NDAs, I would be glad to share our experiences with anyone on this forum who is considering automating their NDA process.
 
We generate more than 200 NDAs each month with almost no time cost to our attorneys. Currently more than 8,000 NDAs are in our system; they can be searched for by any employee using a simple web interface. Any employee can (within safe limits) draft and submit NDAs for signature in literally minutes.
 
At the cost of asking people to do things in a new way, we save money, time, fuel, and trees while creating NDAs that don’t wind up at the bottom of a drawer.
 
If anyone is interested, I have a little two-page PDF that lays out the real costs and risk of paper & ink NDAs vs. electronic. It’s striking when you see the difference.
 
Barry Medintz: Let me add to what has already been said by many of the colleagues — in my company (Motorola), we use a very efficient on-line NDA creation system which the sales/business/engineering teams must use to create an NDA. The Law Dept does not create NDAs. The entire process takes less than five minutes and can be done anywhere with internet access. If it were not user friendly, these teams would wind up calling their dedicated attorney to help create an NDA which we found to be of minimal value.
 
The system contains almost all drop-down boxes, except for the name/contact information of the other party and a “fill in the blank” for the purpose of the NDA (we actually state: “Fill in the rest of this sentence to clearly identify the purpose of the NDA: “The purpose of this NDA is ________”). We have a dedicated NDA administrator who is responsible for reviewing all NDAs once they are created (to make sure everything is in order, including that the purpose is appropriately clear) and to negotiate any changes requested by the other party. We also use a solo practitioner who supports the administrator on more complex issues.
 
We do not believe in a “one size fits all approach”, but have found this approach, with training, to have served us well. Good luck!
 
 

 


 

 

 

 


 

 

 

 


 

 
 
 

Editor
Kerrie Tarrant
ktarrant@iaccm.com

Consulting editor

Tim Cummins, CEO, IACCM

Vice President of Research and
Advisory Services, and Advertising
Sales enquiries

Katherine Kawamoto

Editorial Panel
Mark David, CommitMentor, UK.
Craig Guarente, Oracle, US
Helena Haapio, Lexpert Ltd, Finland
Doug Hudgeon, Macquarie Bank Ltd, Australia
William Knittle, BP, UK
Lamar Chesney, SunTrust Bank Inc, US
Sterling A. Spainhour, Charlotte School of Law, US

Automation and technology panel

Mark Darby, Alliantist, UK
Ashif Mawji, Upside Software Inc, Canada
Tim Minahan, Ariba, US
Kevin Potts, Emptoris, US

Address: International Association for Contract & Commercial Management (IACCM), 90 Grove Street, Ridgefield, CT 06877 USA. Ph: (1) 203 431 8741, www.iaccm.com
Editor: ktarrant@iaccm.com
Sales enquiries: kkawamato@iaccm.com

This issue may be cited as (2009) 2(3) Contracting Excellence.
ISSN: 1937-9765; ISSN: 1937-9757

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